Here are some of the more astounding sections of the SEC’s Complaint against Frank DiPascali to chew on. It is truly hard to read and contemplate many of these without shaking your head in disbelief:

3. DiPascali oversaw the mechanics of an entirely fictitious investment strategy, known as the “split-strike conversion,” that BMIS claimed to be pursuing on behalf of its clients. DiPascali helped Madoff structure and record non-existent trades that were reflected on millions of pages of customer confirmations and account statements distributed each year. Not one of the trades purportedly executed as part of this strategy ever occurred.

24. …Madoff told most of BMIS’ investors that he managed their accounts pursuant to the split-strike conversion strategy. In fact, Madoffs entire split-strike conversion strategy was a longstanding fraud. Every trade, every order ticket, every account statement, every confirmation and all other relevant records were fictitious.

34. Once Madoff decided to do a [fictitious] “basket trade,” DiPascali (or his staff)provided key punch operators with the relevant pricing information and they then entered the data into the AS/400. The system then generated and printed hundreds of thousands of pages of confirmations (a separate one for each stock, for each account), which BMIS then mailed out to each investor. Millions of pages of paper and hundreds of hours of BMIS employee time were expended on these mailings each year.

43. Year after year, [DiPascali] directed that millions ofpages of false account statements and trade confirmations be prepared and distributed to thousands of investors. He knew that the holdings, the transactions, and the returns on those accounts were false and he lied to investors about it.

44. In addition to the massive mailings of fraudulent trading and account records, DiPascali spoke to investors about their advisory accounts at BMIS and lied directly to them about their accounts. He lied about the trades and account values; he lied about the strategy and purported controls; he lied about BMIS’ proxy voting policies and its custody of assets. Everything about the BMIS advisory accounts was a lie because the securities did not exist.

50. Beginning in or about 2002, DiPascali set up an account at BMIS for himself. DiPascali named the account after his fishing yacht, Dorothy Jo. Although DiPascali made no capital contributions to the account and had no positive balance in the account, DiPascali withdrew over $5 million from the account between 2002 and 2008 to fund his personal expenses, including the purchase of a new boat.

52. In the final days of the fraud, the money available to meet investor redemptions had dwindled to a few hundred million dollars. DiPascali and Madoff discussed using the remaining funds to liquidate the accounts of family and friends of the firm, including employees, rather than honor redemption requests by BMIS’ larger institutional investors.

53. To that end, DiPascali reviewed BMIS investor lists and identified which accounts should be liquidated. With Madoff’s approval, he then instructed that checks be prepared to liquidate those accounts. These checks, totaling more than $150 million, were then prepared. However, Madoff was arrested and the checks were seized before they could be distributed.

60(a). Special Accounts. Although great effort was made to conceal the existence of advisory accounts to the fullest extent possible, some audits and regulatory inquiries required an acknowledgment that the business existed and the production of books and records to substantiate the activity in those accounts. However, Madoff was careful to avoid ever disclosing the scope and magnitude of the accounts, hiding the fact that there were several thousand accounts with aggregate values in excess of $50 billion. Accordingly, DiPascali helped Madoff devise a shifting subset of 10 to 25 accounts – the “special” accounts – which they deceptively presented as the universe of BMIS advisory accounts. DiPascali and others then prepared various fake books and records reflecting only this subset. This way, BMIS provided auditors and regulators with just enough information to make the phony books and records appear credible but not enough to appreciate the magnitude of the advisory business.

61(b). In order to avoid scrutiny by sophisticated financial institutions that might notice something troubling about BMIS’ account statements or trading activity, Madoff developed a practice, which DiPascali enforced, of closing down accounts for investors who worked at such institutions. When DiPascali learned that BMIS received a request from a compliance department at a financial institution for an account statement of an employee (which many financial institutions do as a matter of policy), DiPascali would inform Madoff, who then directed that the account be closed.

61(c). Concerned that Forms 13-F filed with the Commission by BMIS’ fund-of-fund investors would expose the magnitude of the fictitious BMIS positions to the outside world, Madoff and DiPascali pretended to exit the split-strike conversion strategy and shift into U.S. Treasuries before the close of the quarterly reporting periods. In this way, they avoided having fictitious options and stock positions disclosed in public filings of its investors (or of BMIS);

61(e). Madoff was concerned that an investor, auditor or regulator might request to observe trading in the advisory accounts in real time at BMIS’ offices. To prepare for this possibility, Madoff instructed DiPascali to oversee a phantom computer trading platform that would appear to reflect real trading. In the event of a surprise visit from outsiders requesting to observe real time trading activity, one BMIS employee was to enter trades on a computer screen and another was to go into an office nearby that was equipped with a linked computer and play the role of a counterparty trader in Europe. At Madoffs direction, DiPascali and others tested this network periodically to ensure that it remained operational.